Group moves Michigan up in ranking of tax friendly states

By MICHAEL MARTINEZ

Michigan has the 12th-friendliest tax system in the nation, thanks to the elimination last year of a complicated business tax, according to the Washington D.C.-based Tax Foundation.

The Great Lakes State experienced the second-highest jump in rank, climbing from No. 18 to No. 12, according to the foundation's 2013 State Business Tax Climate Index, released Tuesday. Economists attributed the jump to the elimination in 2011 of the Michigan Business Tax, which was replaced with a flat-rate 6 percent corporate income tax.

The elimination of the former business tax helped simplify things, said Tax Foundation economist Scott Drenkard.

"It was thought Michigan would never deal with this horrific tax but they did and it's an incredible accomplishment that can never be understated," he said.

The new simplified corporate income tax eliminated myriad calculations that turned off businesses that considered moving to Michigan, said Rich Studley, CEO of the Michigan Chamber of Commerce.

"It might as well have been in Chinese," Studley said Tuesday.

According to the report, this change caused Michigan's corporate income tax rate to jump from 49th best to seventh best, an unprecedented increase.

"It's rare you see such a leap in one year," said Joseph Henchman, Tax Foundation vice president.

The top 10 states, Henchman said, earned that rank because they do not have one of the three main taxes: individual income tax, corporate income tax or sales tax. The top three states — Wyoming, South Dakota and Nevada — don't have either an individual or a corporate income tax.

"There's no tax quite like no tax," joked Drenkard.

New York ranked the worst among all 50 states, bumping neighbor New Jersey from the undesired spot.

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